Taiwan Introduces Comprehensive Guidelines for Cryptocurrency Regulation

Taiwan’s Financial Supervisory Commission (FSC) has officially released comprehensive guidelines for virtual asset service providers (VASPs). These guidelines, introduced in March of this year, mark a pivotal step in enhancing customer protection and regulatory oversight in the rapidly evolving world of cryptocurrencies.

The guidelines, known as the “Management Guidelines for Virtual Asset Service Providers (VASP),” build upon the Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) measures established by the FSC in June 2021. The new directives take inspiration from international regulatory trends and incorporate input from industry experts, reflecting a commitment to progressive regulatory evolution.

Key highlights of the guidelines include:

1. Environmental Impact Disclosure for Crypto Asset Issuance

For any virtual assets issued through platforms, issuers are required to disclose a comprehensive whitepaper on their respective websites. This whitepaper must contain essential information, including the environmental impact of the asset. Platforms are also mandated to provide links to these whitepapers for public access.

2. Review Mechanism for Listing and Delisting Virtual Assets

Platforms must establish rigorous standards and procedures for reviewing the content of whitepapers and deciding on the listing or delisting of virtual assets. These standards should be integrated into their internal control systems.

3. Segregation of Platform and Customer Assets

To ensure the safety of customer funds, platforms are obligated to segregate customer assets from their own holdings, both in legal currency and virtual assets.

4. Transparency and Fairness in Trading

Platforms are required to formulate and publicly disclose rules governing virtual asset trading to maintain market fairness. They must also establish mechanisms to ensure equitable market operation.

5. Contract Formation, Advertising, and Complaint Handling

Platforms are instructed to conduct their operations based on principles of fairness, equity, and good faith, as they strive to uphold customer protection provisions.

6. Operational Systems, Information Security, and Wallet Management

To maintain the integrity of their systems and secure private keys, platforms must implement robust management mechanisms for ongoing operations, information security, and wallet management.

7. Information Disclosure

Platforms are expected to provide full disclosure on matters related to virtual asset issuance, asset listing and delisting, asset segregation, trading information and rules, and customer protection.

8. Internal Controls and Institutional Auditing

To ensure effective oversight and accountability, platforms are required to establish internal control and internal audit mechanisms. They must be prepared to undergo on-site audits conducted by the FSC or designated entities.

9. Individual Currency Exchangers

Individuals engaging in virtual asset services must declare their commitment to complying with AML regulations. The quality and content of their declarations should be equivalent to those made by corporate entities.

10. Foreign Currency Exchangers

Foreign virtual asset platforms seeking to operate within Taiwan must undergo registration in accordance with the Company Act and declare their commitment to complying with AML regulations. Unauthorized solicitation of Taiwanese customers is strictly prohibited.

In response to the release of these guidelines, the FSC is urging VASPs to promote self-regulation within the industry. Industry associations representing VASPs are expected to develop self-regulatory standards aligned with the guidelines to strengthen internal controls and, ultimately, safeguard customer interests.

In light of recent illicit activities associated with foreign virtual asset platforms and the high volatility and speculative nature of cryptocurrencies, the FSC advises Taiwanese citizens to exercise caution when engaging in cryptocurrency trading and to assess the associated risks thoroughly.

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